Data: Spotify; Note: MAU = monthly active users; Chart: Sara Fischer/AxiosSpotify said Tuesday it topped 300 million paid subscribers, joining Netflix as the only major global streaming platforms known to have reached that milestone.Why it matters: It underscores the company's yearslong strategy to turn Spotify from a music streaming app into a broader platform for personalized audio and fan experiences.By the numbers: The tech giant grew paid subscribers 9% year over year last quarter, with gains across every region.Its monthly active user base rose 12% to 777 million globally, just below its guidance, a testament to Spotify's focus on converting free members to higher-value paid users.Zoom in: Spotify's steady premium user growth has helped the streaming giant expand its profitability after years of losing money.Gross margin hit a record 33.4% last quarter, moving the company closer to its long-term 35%–40% margin target.Free cash flow also hit a record high of €797 million ($918 million) in Q2.Zoom out: While Spotify's ads business remains challenged, the company believes it will see stronger gains in the second half of the year as it expands automated ad-buying tools globally. Ad-supported revenue grew 1% year over year, compared to 15% for premium subscription revenue growth. Between the lines: New premium offerings, including tiered subscription products and personalized experiences, are what's helping drive subscriptions.Earlier this year, the company rolled out AI-powered personal podcasts, announced expanded Audiobooks+ tiers, and introduced more conversational AI tools like Talk to Spotify and Studio by Spotify Labs.The big picture: After years of expanding beyond music into podcasts and audiobooks, Spotify told investors in May that it's now entering its next phase of using AI and personalization to deepen engagement.The company says it's expanding its AI DJ product into more languages and leaning more into products that serve superfans, such as its new Reserved concert ticketing feature. On Tuesday, the company announced it's developing an AI-powered remix and cover-song tool through licensing agreements with Merlin, adding to similar deals with other major music companies. The bottom line: Once criticized for thin margins, Spotify has proved it can build a consistently profitable business. It believes leveraging AI to build a "large taste model" around user preferences, rather than building its own LLMs, will allow it to innovate without spending billions of dollars on AI infrastructure costs.